The Super Committee: Keep Looking For That Pony In The Pile

21 Aug 2011

Posted by Stan Collender

I continue to be astounded at how many people…including a number of supposed insiders who should know much better…continue to believe that the debt ceiling increase/deficit reduction deal agreed to just before Congress left town for the summer recess is going to have as big of a positive impact on the budget outlook as we were promised when the legislation – the “Budget Control Act” – was signed into law.

In fact, if budget history is any guide, the overwhelming likelihood is that the deal will have no impact whatsoever and will be abandoned long before it is implemented.

This first of two posts on this subject is about the Joint Select Committee on Deficit Reduction (aka “the super committee”) that, in spite of all the evidence absolutely to the contrary, somehow is going to come up with the deficit reduction plan that up to now has been impossible to achieve.

The key thing to keep in mind about the super committee is that there’s a long and storied history of budget commissions completely failing to accomplish anything.

The first massive budget commission failure I know about happened almost 60 years ago when President Dwight Eisenhower created a blue-ribbon panel charged with coming up with a list of wasteful and duplicative spending. This seemingly easy (at least by today’s standards) task turned out to be impossible when the panel was only able to recommend that one obscure and pitifully small program be eliminated.

In 1982, the much-ballyhooed Greenspan Commission on Social Security failed to come up with anything on its own. It’s only considered a success because it was allowed to announce the deal that actually was negotiated privately by President Ronald Reagan and House Speaker Tip O’Neill (D-MA).

The Andrews Air Force Base negotiations in 1990 produced a deal that was so resoundingly derided immediately afterwards that key members --Newt Gingrich (R-GA) for example -- refused to vote for it. Republicans now often talk about Andrews as the primary example of why there shouldn’t be budget summits. Then Office of Management and Budget Director Dick Darman, who was a member of the Republican negotiating team, never recovered his standing in GOP circles after that commission.

To these three add (1) the National Economic Commission, the panel co-chaired by Robert Strauss and Drew Lewis that was appointed by George H.W. Bush administration toward the end of his term that accomplished nothing; (2) the commission chaired by Senators Bob Kerrey (D-MA) and John Danforth (R-MO) that in 1994 came up with a report that virtually no one read or remembers; and (3) the Bill Clinton-appointed President’s Commission to Study Whether the United States should have a Capital Budget that wrote a report more obscure than Kerry-Danforth.

But relatively ancient budget history is less important in evaluating the prospects for the super committee than what happened with the multiple commission failures from just the past year or so.

Start with the budget commission that never was: the commission proposed jointly by Democrat Kent Conrad (ND) and Republican Judd Gregg (NH) that failed to be created in 2009 when seven Republicans who had co-sponsored the legislation voted against the bill that would have actually established the panel. The reason the seven opposed the legislation is one of the best reasons why the super committee is likely to fail: they were pressured to vote against it because to the possibility that revenue increases might be considered.

The failure of Conrad-Gregg then prompted the White House to create a presidential commission that eventually became known by the names of its two co-chairs –Democrat Erskine Bowles and former Republican Senator Alan Simpson (WY). Bowles-Simpson didn’t get the required 14 members to support the deficit reduction plan proposed by its chairs and ended in ignominy.

Bowles-Simpson was followed by the talks led by Vice President Joe Biden that didn’t reach an agreement, and the so-called Gang-of-Six talks in the Senate that failed to produce a plan that got more than six votes.

Given this unbroken series of failures, why does anyone think that the super committee will do any better? The 4 of the 12 members of the committee that were also members of Bowles-Simpson all opposed the plan proposed by its co-chairs. No members of the Senate Gang of Six, which at least were willing to compromise, were named to the super committee. All of the 6 GOP members of the committee have signed the pledge refusing to raise revenues and all of the Democratic members have all done the equivalent by saying that they will not agree to look at Medicare, Medicaid, and Social Security unless additional revenues are part of the plan.

Optimists have been saying that the one change from all the previous deficit reduction committees, task forces, and panels that have failed in ancient or recent budget history is that the super committee has a fiscal sword of Damocles hanging over its head because of the across-the-board spending cuts that automatically will go into place if it fails. Most politically onerous, we're told, is the potential reductions in military, education, and transportation programs.

But that outlook ignores the fact that congressional Democrats and Republicans have agreed to throw those programs under the budget cutting bus when the Budget Control Act was adopted. They and the industries that would be most affected might prefer that it be otherwise, but spending cuts in these areas have already been declared to be politically preferable to a tax increase or cuts in Medicare, Medicaid, or Social Security.

In other words, those who keep saying how much confidence they have in the super committee and the prospects for it success are really doing nothing more than the budget equivalent of looking for the deficit reduction pony in a pile of fiscal crap.

Oh well. And, once we get our fiscal house in order, then what? The economy will take off like a rocket? Trim Medicare, Social Security, and all the evil regulations that are a "wet blanket" and we'll reach full employment? The "confidence" we're all looking for is going to burst out of nowhere?

I just don't see any relation to the deficit and what's going on in the economy, except for that everyone keeps babbling about it. People need jobs; demand must be restored. We could balance budgets and shrink government to the Presidency and House and we'd just wind up worse off. I know where I live, in a state capital, we have nothing to replace the lost government jobs. I wish everyone could see the restaurants that have closed their doors just down my street. It's ugly and this cut-everything-immediately mentality seems to be having a pretty gnarly ratcheting effect on employment--forcing it upward.

Nothing can come of any of these committees until the Democrats answer of the Republicans BS that "we have a spending problem not a revenue problem." The truth is that income taxes are simply too low. From 1945 to 1980 they averaged around 12% of GDP; however, since the Bush tax cuts they have been about 9%--that difference is the deficit. We need to raise them back to 12% to eliminate the deficit. but as long as the Republicans can get away with telling the public that we do not have a "revenue problem," they will never agree to increase income taxes. Moreover, as I have said before: The CBO projected that the surpluses Clinton left for Bush were enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. These “surpluses” were made up entirely of excess payroll taxes building up the trust funds. Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the Republicans to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing our money.

The other thing that no one seems to talk about is the fact that it is nearly impossible for a current Congress to bind the appropriations of a future one. So the most perfectest bestest 10-year plan of all time can be enacted by the current Congress, and if the political winds have shifted, the next Congress can simply appropriate whatever they want, anyway.

Given her latest comments, there is no way that her group and the Tea Party will agree. I cannot see any possible compromise unless the Centrist (slim) majority of both parties abandon the extremes for a deal. That would take old fashioned statesmanship (like the last SSI solution. Dont hold your breath!!!